I. Introduction
II. Impact of the Information Technology
Revolution on Society and Higher Education
III. The New Learning Environment
IV. Implications for Public Policy
V. Change Strategies: The Role of Incentives
VI. Investment Strategies
VII. Conclusion: Interpolating the Future

Governing and coordinating approaches come in many forms. Over the past four decades a set of structures often called "coordinating boards" or "statewide governing boards" have developed to serve as instruments of public policy toward higher education.

Traditional approaches to program approval and review at the state and system levels fit well with the way in which traditional, campus-based programs have developed. New programs emerge from individual faculty or discrete departments within a single institution. Requests for authorization and funding travel up the hierarchical structure and are eventually evaluated by a state or system board on the basis of their fit with institutional missions, resources and costs, and external demands and political support for the program. Decisions often rest upon "boundaries" which provide institutional franchises for designated geographic or programmatic areas.

Developments in information technology and distance learning, however, challenge many of the assumptions and virtually all of the foundations upon which states and systems of higher education have built their coordinating and governance, program development, and financing policies. New consortia delivering programs at a distance and involving multiple partners which cross traditional role and mission boundaries, as well as state and national boundaries, will certainly challenge the criteria upon which program authorizations have been made in the past. State and system boards also will need to rethink their program development strategies.

Policy makers need assistance in evaluating and facilitating state and multi-campus system investments in technology, which are aimed at increasing both "learning productivity" and cost effectiveness.

In this paper, we first consider the impact of information technology on society and on the environment in which higher education operates. We then outline the key issues which we believe will affect the regulatory, organizational and financial policies governing higher education in the years ahead.

Society's higher education requirements are undergoing a fundamental transformation. A rapidly growing student population is becoming older and increasingly diverse. In addition, the new economy requires a workforce capable of handling an exploding knowledge base. Industries are looking to higher education institutions to provide the necessary education and training. There is financial pressure, too: colleges and universities must control and even reduce costs, as well as manage new competitive dynamics, while responding to growing demands. On their own, each of these factors is significant; collectively they challenge fundamental higher education strategies and practices as we approach the twenty-first century.

Emerging digital technology, especially the Internet, is ideally suited to meet the new learning needs by enabling a digital learning infrastructure. But such an infrastructure offers more than just education-as-usual on the Internet. It offers a set of extraordinary new tools: self-paced, multimedia modules that deliver leading pedagogy; in-depth outcome assessments; and online interaction with fellow students and teachers that facilitates continuous feedback and improvement.

What follows is a set of assumptions about the digital future which will affect the environment in which public policy is created.

Technology Penetration

• The communications, computing, and information industries are converging in the digital environment.

• The digital environment will include a convergence of sound, video and data with synchronous and asynchronous communication.

• Digital technology will continue its rapid ascent as analog technologies continue to decline. Microprocessor performance has been increasing at a relatively constant rate, doubling approximately every 18 months. This trend is expected to continue for at least another decade.
• The Internet is predicted to grow at a compound user growth rate of 62 percent between 1994 and 2000. Conservative estimates put the number of today's Internet users at around 50 million. Predictions are for over 1 billion users before the end of the decade; network traffic will exceed telephone traffic.

• Bandwidth will see the most revolutionary change in the next decade. While computing power is estimated to increase 100 fold between 1990 and 2000, the expansion in bandwidth is anticipated to be between 800 and 1,000 times. The expansion in bandwidth will allow such things as the delivery of multimedia directly to the home.

Impact on Society

• The rate at which new technologies are penetrating business and the home can be expected to increase.

• More than 40 percent of adults in the United States own a computer.

• Proficiency in using technology is now for all practical purposes a required competency in the workforce; it is becoming another basic skill. Sixty-five percent of all workers use some type of information technology in their jobs. By the year 2000, this will increase to 95 percent.

• The capacity for individuals to use technology both independently and collaboratively in their work is increasingly required. No one person has all the competencies needed in today's high performance workplace; collaboration is essential.

• By the year 2000, 50 percent of the working population of the United States will be employed in home-based businesses. Telecommuting is becoming a way of life.

• Increasingly, we are experiencing the permeation of network use throughout society. Entering students arrive on campus network-savvy and graduates move into a world increasingly reliant on networked communications.

Networks and networked information lead to disintermediation, disaggregation, diffusion and differentiation.

• Information technology places pressure on the middleman. Computer networks offer the possibility of disintermediation--the consumer accessing services and information directly rather than going through an intermediary (such as ATMs, travel information, stock transactions, and so on.)

• All of our modern technologies with rapid diffusion rates (high consumer acceptance) have been personal and disintermediated. Personal mediation is moving to the background while "user friendly" and simplified but "smart" automated mediation moves to the user interface.

• Diffusion implies that the more something is used, the more value it has (such as the telephone). As Lewis J. Perelman puts it, "A few television sets are a novelty; one hundred million televisions define a way of life."

• Technology drives us toward disaggregation which, in turn, enables "mass customization." Information products and services are being broken apart and repackaged to cater to the desire of consumers.

• Technology also enables differentiation of products and services; they can be combined and used in different ways for more than one purpose to meet different needs.

Impact on Higher Education:

The Wired Campus

• Campuses are going to be wired with or without new instructional models. Institutions have already made-and will continue to make-huge investments in infrastructure.

• 83 percent of today's college students use the Internet; 40 percent use it every day.

• Even in many traditional institutions, the majority of students live off campus and, in part, telecommute to their campuses.

• In the past, institutions have felt compelled to "provide" the infrastructure by building computer labs on campus. But increasingly, students are buying the technology just as they buy textbooks. For example, about half of entering freshmen at the University of Wisconsin-Madison arrive on campus already owning computers, mostly laptops, many with CD-ROM drives. The availability of less expensive, "network" computers promises to accelerate this trend.

• The research enterprise has been revolutionized and redefined with the advent of inexpensive computational devices and access to high performance networking.

• Academic and administrative services offered by traditional educational institutions are changing to accommodate a consumer-focused environment. University systems use computer technology to streamline financial aid offices, admissions and registrarial procedures.

Disaggregation unbundles the instructional process

• Technology enables us to disaggregate the place, the content, the delivery, and judgments about the quality of education. By separating instruction from assessment, teaching from degree granting, content development from content delivery, and even service from compliance on the part of government, traditional roles are redefined and new ones emerge.

• Information products and services are being repackaged to cater to the desire of consumers to disaggregate the packages that publishers, librarians, and even authors have been using to produce and distribute research information.

• Teachers and learners wish to disaggregate the one-size-fits-all packages of the courses and the textbooks that have characterized learning environments for the past several hundred years.
• Disaggregation enables "mass customization" where learning materials may be customized by the instructor as well as the learner.

The Net expands learning opportunities

• Distance-learning technologies, such as the Internet, and to a lesser extent, cable and satellite-based systems, enable learners to access education whenever and wherever they want. Online experiences offer educational opportunities to millions of learners previously constrained by time, location, or other factors.

• Communication, computing, and networking technologies expand the reach and range of traditional residential colleges and universities and enable students to synthesize on-campus with online experiences.

• Other students, particularly working adults, are opting entirely for online educational experiences that provide them with the education and flexibility they need.
• The online experience allows colleges and universities to project themselves far beyond their physical locations. The place of higher education is shifting from the classroom and the campus to the workplace, the home, the library, the network. Students are able to access learning from a variety of places.

• The time for learning is also changing. Communications technologies enable a shift toward asynchronous rather than synchronous learning experiences, which makes learning available seven days a week, 24-hours a day. Increasingly learners use networks to interact with their peers, their instructors, professional experts, and other information resources; they are doing it when it is convenient, not simply during scheduled class times.

• The network expands options for interaction among faculty and students; external experts are more easily accessed.

• The opportunity for faculty to individualize learning to account for previous experience, style of learning and preferred pacing and to personalize contact with students is increased.

• The online format can significantly expand the availability of continuing education programs and offerings for recreational learners as well.

The Net challenges regulation

• The Net lowers the threshold of entry to the higher education marketplace for new commercial and non-profit educational providers by eliminating many barriers. The advantages of the vertically integrated, physical campus begin to disappear in the virtual world and, in fact, become disadvantageous obstacles to rapid change.

• New developments in technologies and the explosive growth of networks will continue to erode the geographic hegemony of higher education. Students will be more likely to select educational institutions based on offerings, convenience and price than on geography. This competition will not be limited to the United States or North America; it will be global.

• Communications technology is creating a national and global market for the production and sale of education delivered across state lines by a variety of electronic modalities. Today, American institutions can offer electronically delivered education over the Internet to students living in every nation that has a telephone system.

• The development of ever more effective electronic modes of delivering education at a distance challenges the tradition of unfettered state control over education.

Currently, individual colleges and universities bundle a number of functions, including standards setting, accreditation, content creation, and delivery and administration of instructional materials. In the new environment, these functions can be disintermediated, globalized, and carried out more efficiently by separate, specialized entities.

Interactive multimedia and other technologies will change how we think about providers and who we regard as providers. Learning resources that were once only available through educational institutions will appear in retail stores in the form of multimedia software and other computer-based courseware. Consumers will be able to purchase learning products independently and learn at their convenience. Historically underrepresented in the traditional model of education, consumers will collectively and directly spend millions of dollars each year on education. This buying power will have a tremendous impact on who controls learning.

Education will no longer take place within the silos of individual institutions (or even their virtual equivalents), but instead in a dynamic global marketplace of customers and suppliers. This shift will be driven by:

• high front-end production costs, which force suppliers to seek larger markets;

• significant economies of scale and low marginal costs for incremental use, so that suppliers are motivated to achieve high market-penetration and revenues;

• interoperable standards and modules that streamline production processes and expand the range of available products and services;

• the global, real-time nature of the Internet which enables a critical mass of customers and suppliers from around the world to efficiently interact.

Managing the transition to this new learning environment will require bold leadership and public policies that find new ways to harness market forces and come to terms with emerging social, technological and financial issues. Institutions of higher education and other players must rigorously assess their roles and niche competencies, and form new partnerships in order to contribute and compete.

A New Vision: A Global Learning Infrastructure

We envisage a "global learning infrastructure"-a student-centric, virtual, global web of educational services-as the foundation for achieving society's learning goals. This contrasts with the bricks-and-mortar, campus-centric university of today; it even goes beyond the paradigm of the virtual university, which remains modeled on individual institutions. The digital global learning infrastructure will encompass a flourishing marketplace of educational services where millions of students interact with a vast array of individual and institutional educational suppliers. It will be delivered through the Internet, by way of broadband cable, XDSL telephony technologies, wireless technologies (both satellite and terrestrial), and other technologies. It is being developed in phases, but will ultimately cross all institutional, state and national borders.

The global learning infrastructure draws its capabilities from digital technology and the Internet. It could not have existed five years ago-but it will be pervasive five years from now. Undoubtedly, individual institutions will exploit these technologies to advance their programs. But without conscious, concerted effort, the results will be a continuation of today's inadequate, piecemeal solutions. The challenge-and extraordinary opportunity-is to develop the integrated digital learning infrastructure to meet the educational needs of the twenty-first century.

At the technology core of the global learning infrastructure are fully interoperable modules and an enabling infrastructure which will:

• Extend access to virtually anyone including old and young, part and full-time;

• Provide convenient anytime/anywhere/anyhow access to support continuous education;

• Deliver high quality, self-paced, customized, world-class content and pedagogy;

• Be cost-effective, dramatically reducing the two biggest costs of the current system: faculty and physical plant; and,

• Capitalize on market forces to achieve these goals and provide the flexibility to respond to evolving requirements.

The digital global learning infrastructure allows anyone to be a student. Millions of new users, especially those from disadvantaged groups and in remote locations, enjoy an access that they could only dream of previously. Students use highly targeted search engines to find courses of interest or surf to see what is available. Consumer directories, credit ratings, and course previews and demos make it easy to make informed choices; recognized interfaces provide easy-to-use purchase and auditing options. Students register, apply for financial aid and receive counseling online. The virtual school is open around the clock and throughout the year, allowing students to work at their own pace and convenience. Many adult students log on in the very late hours, after discharging family or work responsibilities.

Convenience

No matter where they live, students have access to the best resources from around the world. Students in small towns gain access to the world's leading content and pedagogy. Like the recordings of the country's most celebrated artists, those of the best will drive out those of the merely good. Online text, audio and video interactions provide a rich, diverse context and give students individualized support from instructors and teaching assistants. Teachers, credit granters and students disaggregate and combine modules to personalize learning packages. Gone are the days of "one size fits all" in course delivery. Modules are continually updated and improved since educational providers do not have to accumulate revisions and issue an expensive new book--with limited sales and revenues--every two years.

Quality

New quality measures are introduced. Traditional measures such as full-time faculty, number of books in the library, students in a class, amount of contact, or budget size are hardly relevant. Fortunately, the new digital infrastructure enables a wealth of customer data to be collected from student progress (base line assessments, exercises, tests), user on site behavior and feedback. These data variously are made available to students, instructors, accreditors and consumer agencies. Courses and programs organically but efficiently evolve, building on mountains of knowledge about users, and produced via highly templated authoring tools.

Online, interactive multimedia prove to have exceptional educational efficacy for subjects such humanities, politics and psychology, whether it be video clips from Stratford theater or up to date news clips, or mini-documentaries of family life. Online text, audio and video interactions provide a rich, diverse social context and give students individualized support from instructors and teaching assistants.

Though the system offers users considerable control, some subject areas are still highly structured. Parents' concerns as to how teenage freshmen can possibly be placed in full control of their educational experience are addressed by many institutions/degrees which require students to take highly structured, mandatory curricula, and provide stringent proof of competency to move ahead. New consumer reviews and advising services help students (and their parents) effectively participate within the expanded marketplace of opportunity.

The global learning infrastructure does not replace all traditional pedagogy, but rather supplements and transforms it, creating a new blend of face-to-face and electronic interaction. Instead of the death of traditional face-to-face pedagogies, the reverse happens. Just as television brought new focus to radio, digital education brings more attention to wisely using face-to-face contact among instructors and students. Seasoned workplace trainers contribute their experience to designing higher education programs that integrate electronic and face-to-face contact for adult learners.

Cost-Effectiveness

Virtual publishing drives the costs of reproduction and distribution to almost zero, while admissions limitations-for cost reasons-nearly vanish. Authoring templates reduce the front-end costs for preparing instructional materials, and the ability to make small, continuous incremental changes encourages experimentation and innovation. Initially, major investments are made where payoff is high, e.g., for courses with high enrollment, standardized curriculum, a wide range of user types, demands for continuously updated material, effective measures of progress, and regionally distributed experts.

For instance, approximately, 50% of all community college and 35% of all baccalaureate enrollments are in one of twenty-five five basic courses, e.g., introductory English and mathematics, basic biology, chemistry etc. Today these courses are typically delivered through lecture presentations and weekly groups supported by a graduate student. Enrollment in these courses number in the millions. Revenues/cost savings of even two hundred dollars per student/per year provide a cost-effective basis for investments in the millions of dollars for each of these courses.

Market Responsiveness

In the global learning infrastructure, the customer is king. Courses are self-paced and adaptable to a wide range of learning styles. Data on student progress (base-line assessments, exercises, tests), onsite behavior and feedback is used to shape courses and programs. Providers easily modify their material in light of this data and competitors' offerings. Within hours, resources are updated; within weeks, a team of experts, artists, programmers and instructional designers develop and deliver substantial course material worldwide.

Driven by knowledge-hungry workplaces, and the potential for national and international markets, new standards are defined. Some of these standards are highly targeted, aimed at competing with or exceeding Harvard and MIT in specialized areas, while others are aimed at mass markets. Although government approval is desirable, it is not necessary. Imagine the compelling attraction of an Advanced Computing Specialization offered and co-branded by IBM, Microsoft, Harvard, and MIT.

A variety of academic and private agencies provide accreditation; similarly, instructional materials are diverse and are produced by a range of content creators. Some are modeled on standard pedagogical components (e.g., demonstrations, tutorials, exercises, tests), while others are more specialized (graphics, text, links, individual demos). Compared to traditional print-based textbooks, the new pedagogy is highly multidisciplinary, requiring attention to design, interactive instructional design, multimedia graphics, and programming.

Delivery providers bring together consumers and suppliers, integrating all aspects of the educational process-accreditation, standards, content, delivery. They include universities, specialized content providers, and publishing and technology companies. In response to low marginal costs of production and distribution and high economies of scale, providers rush to achieve a critical mass of users. A wide variety of pricing, branding and partnering strategies are deployed, to the benefit of the consumer.

New services that benefit users and providers are available. Consumer services help students evaluate educational offerings according to cost, quality, outcome, and satisfaction. Academic credit banks function as trusted intermediaries, enabling students to deposit credits from any source and-when certain requirements have been met-earn an accredited degree. Broker services help the myriad of suppliers exchange information and products and work together.

Today's Environment

Higher education is a highly regulated industry.

• Institutions operate under the rules of more than sixty-five accrediting associations, fifty state licensing agencies and, increasingly, the U.S. Department of Education, the U.S. Department of Defense and the Veterans Administration.
• Policy makers manage public resources by regulating competition (reducing program duplication) and restricting who can award degrees and grant credit.
• In 1993, only thirty-four institutions of higher education operated in more than one state and only nine of them operated in more than two states. Out-of-state programs had a combined enrollment of 47,000 which represented 0.3 percent of total higher education enrollment. Twenty-six states had no students enrolled in programs operated by out-of-state regionally accredited institutions; twenty states had less than 1 percent in out-of-state enrollments and four had less than 2 percent.
• In eleven states, including the industrial states of Connecticut, New York, Pennsylvania and Ohio, no out-of-state institution can be licensed to operate.

• Authority to grant credit is in the control of the faculty, both individually and collectively--e.g., individual faculty members decide which students will receive credit, departments decide which credit is applicable to what degree, and so on.

• Regional accrediting associations are made up of member institutions who control the standards by which they and their peers are certified.

• Professional accrediting associations are made up of faculty in the discipline who control the standards by which institutional programs are certified. This frequently results in conflicts between an institution and the association (e.g., accountants wanting five-year degrees, many associations' insistence on certain library holdings, etc.)

• Most state agencies appear to be more concerned with protecting local institutions through restraint of trade than they are in consumer protection.

• The excess of regulation in higher education makes it difficult, often impossible, for institutions to innovate. Thus, they remain unresponsive to the rapidly changing needs of the society and the economy.

• Among the more restrictive regulations are the substantive change rules enforced by regional accrediting associations. These rules make meaningful innovation time consuming, tedious and costly, and almost ensure that a college or university cannot respond to rapidly changing economic and social conditions.

• Substantive change is the Catch-22 of accreditation: any institution that wants to meet the changing needs of society through innovation is viewed by the accreditors as showing symptoms of instability.

• Communications technology is creating a national and global market for the production and sale of education delivered across state lines by a variety of electronic modalities.

• The development of ever more effective electronic modes of delivering education at a distance has challenged the tradition of unfettered state control over education.

• Today, American institutions can offer electronically delivered education over the Internet to students living in every nation that has a telephone system. Neither the fifty states nor any nation can control this activity.

• This confluence of events presents an opportunity for the federal government to rationalize the higher education market by making it possible for colleges and universities to operate interstate without having to meet fifty different licensing requirements and six sets of regional accreditation criteria.

As Jim Mingle has noted, the dominant decision-making and allocation paradigm for American higher education is public policy. Whether through direct appropriations from states for public institutions, tax exemption and federal grants for private institutions, or need-based aid for proprietary organizations, public subsidies have long been the lifeblood of higher education. Any change in public support will have a dramatic impact on education's decision-making process and on the ability of many institutions to survive.

The increasing power of the consumer in addition to technology's ability to transcend space, time, and political boundaries is causing a shift in the decision-making process away from public policy and toward market-driven mechanisms. Content and mode of delivery are increasingly defined by external groups: students as well as employers. Communications technologies will contribute to both the increase in the number of providers and the choices for consumers, resulting in a more open higher education marketplace.

Geographic and political boundaries, once the foundation of American higher education, are increasingly less relevant. The power of traditional providers is weakening, thus creating greater opportunity for more customer-responsive institutions and providers to emerge. Policy makers are beginning to believe that good mechanisms to stimulate quality and responsiveness in education may be to increase competition and to redefine certification and regional accreditation.

This vision is compelling to many, both within and outside higher education. It is particularly attractive to those who believe the current system is ossified and unreformable; they view this trend as an important catalyst for change in higher education. Others view technology with alarm, fearing the corporatization of American higher education and the loss of professorial autonomy.

The concept of disaggregation is new to higher education which has long controlled the place, the content, the delivery, and the quality of education. By separating instruction from assessment, teaching from degree granting, content development from content delivery, and service from compliance, traditional roles are redefined and new ones emerge. In a disaggregated model of higher education, how is quality defined and who will determine it?

Challenges for the Future

The competitive environment brought about through global digital networks will transform both educational methods and institutional roles. How should national and regional public policy makers respond? Among the challenges they face are:

• How to create a climate for change

• How to facilitate the creation of new market forces

As communications technology increases in its scope and effectiveness, we are knitting the U.S. economy ever more closely together. As these changes take place, state regulation of what is clearly national interest, increases the costs of doing business at every step and seldom return value to that which they regulate. Should local and state regulation be replaced by national and global frameworks in much the same way as we have de-regulated the railroads, airlines, electric power generation, securities exchange, telephonic communication, radio, television and banking? In each of these instances, technologically driven change in the social order created a national market that made state regulation anti-competitive, ineffective and often irrational.

• How to authorize the marketplace.

• How to facilitate needed changes in

  --institutional role and mission policies

  --program approval and review process

  --service area boundaries

  --the regulation of out-of-state providers

  --admissions, residency, transfer of credit policies

  --financing outcomes vs. institutions

• How to facilitate the establishment of technical standards

• How to control quality

• How to assist students in making good choices

• How to decouple revenue from program cost

• How to develop appropriate social and economic policies

• the effect on communities where local bricks-and-mortar institutions, unable to compete, are forced to close down;

• cross-border jurisdictional matters such as the development of export markets, regulation (if any) of courses taken by citizens of "unfriendly" nations, and, definition and protection of intellectual copyright of educational products;

• privacy and proprietorship concerns with regard to the volumes of student data that will be generated;

• copyright, royalty and financing arrangements for contributors of products and services.

Educom's National Learning Infrastructure Initiative (NLII) seeks to create new collegiate learning environments that harness the power of information technology to improve the quality of teaching and learning, contain or reduce rising costs, and provide greater access to American higher education. Information technology can provide a cost effective tool to increase access by extending the intellectual resources of our campuses to students wherever they may be; to improve quality by offering greater flexibility in time, place, curriculum and by making the student a more active, independent participant in the learning process; and to reduce spiraling costs by substituting networks for capital facilities and by creating less teacher-dependent methods of teaching and learning.

For us, the central question is, how can we enlist information technology in addressing the three major problems facing higher education as we enter the twenty-first century--cost, access, and quality? How might state policy makers carry out their activities in order to promote rather than impede the adoption of new technologies (e.g., changes in regulatory policy)? What kinds of incentives will support these change strategies?

Many of the problems faced by policy makers cut to the core of a higher education system that until recently has catered to local and regional constituencies. State leaders, accustomed to geographic delineations, are concerned about the impact on higher education institutions that today's changing student demographics and the proliferation of distance-learning technologies may have. We believe that shortsighted efforts to protect an outdated system based primarily on geography may make it impossible for our institutions to compete in a networked marketplace.V Far-sighted state policy makers want traditional institutions to be able to adapt to and compete successfully in the new environment. There is, however, a gap between where institutions are today and where they need to be. Furthermore, it is not entirely clear that current institutions will be able to transform themselves. Public policy makers, therefore, should be wary of putting their entire emphasis on trying to change traditional institutions vs. other strategies that can stimulate a broader postsecondary educational marketplace.

How do we navigate that transition? How do we develop strategies for transitioning higher education institutions to the information age?

Bolt-on vs. Transformational Strategies

Outside the realms of administration and research, most applications of technology in higher education in the United States have been of the "bolt-on" variety--i.e., something bolted-on to assist the teacher in the classroom. In fact, most distance education in the United States has been of the bolt-on variety--e.g., using television to extend the conventional classroom to students at a distance. To this Sir John Daniels of the British Open University has observed, "Such an approach fits nicely with the traditional academic view that technology should be a useful addition to traditional teaching rather than a substitute for it. That, of course, is its fundamental weakness. First, it adds costs rather than reducing them." As economists are fond of noting, when labor costs are high (salaries represent something on the order of 80 percent of the operating budget of most conventional institutions of higher education), there can be value in substituting capital (in the form of technology) for labor. Adding capital in the form of technology without reducing labor costs or increasing throughput cannot be expected to do anything but raise costs.

Observing that low cost and product differentiation are the keys to competitive advantage, Sir John also has observed, "The tensions generated by pursuing cost leadership and differentiation will be most strongly felt by universities as they try to apply new technologies in support of these strategies." He feels that without some significant reengineering our more conventional institutions of higher education will simply adopt a "bolt-on" strategy in the application of technology and continue to fail to find either of the keys--low cost or differentiation. A cursory examination of the technology adoption policies of most educational institutions in the United States would suggest that he is correct.

Funding formulas which distribute dollars to institutions and students within a system provide powerful incentives to influence student, faculty, and institutional commitment to change. Higher education is a high-tech industry. A major asset of any high-tech business is its high-quality employees. The task in such industries is not to manage smart people but to manage the environment in which they work, to encourage them to work according to what we want and what society needs. But today's higher education allocation systems do not incent its workforce to do what society needs; they need a fundamental rethinking. How should we adjust our funding formulas and allocation systems to gain institutional and faculty commitment? How do we move states and multi-campus systems to a "redesigned delivery system" focused on learning productivity and cost-effectiveness?

A Significant Barrier to Change: FTE Funding Formulas

Can our institutions of higher education increase academic productivity in the context of today's funding paradigms? While governors, legislators and other public policy makers clearly expect us to be more productive, are they creating a strong disincentive by sticking to their traditional FTE (full time equivalent) student enrollment funding formulas? FTE funding is based on a "time on task" (or time in class) concept rather than a learning achievement or outcome model. The challenge before us it to invent new funding paradigms that create the necessary incentives. Those institutions who are able to reinvest savings achieved via new instructional methods, to move dollars back and forth from personnel to technology, to develop investment plans extending beyond an annual budget cycle, etc. are in a far better position to design more productive instructional programs than are those locked into a funding formula based on outmoded assumptions about teaching and learning.

• Public funding for higher education is based predominantly on students in process with no financial regard for either input or outflow.
• Higher education's funding formulas are based on enrollment ("time served") rather than on accomplishment or successful completion.
• The failure to achieve productivity increases in direct instruction is simply the consequence of a funding paradigm that offers no incentive to the institution for such gains; it is not a failure of the technology or of faculty willingness.

Higher education is comfortable living in an environment where a large of number of students who enter our doors do not leave with any token of achievement. We are satisfied, for example, with such things as:

• Freshmen failure rates of 60 to 70 percent;
• Extension of the freshman year to eighteen months due to closed sections of basic introductory courses in English and mathematics;
• A 28 percent loss rate between the freshman and sophomore year despite the existence of remedial summer programs before the freshman year;
• Satisfactory completion rates for most introductory courses of 64 percent;
• Community college systems where only 9 percent of the students who come wanting an associates degree actually secure an associates degree;
• Four-year schools where less than 40 percent of the students get baccalaureate degrees within seven years;
• Graduation rates for all but the most selective institutions in the 43 to 53 percent range.

• Courses are "offered" according to what faculty want to teach rather than in response to student need.
• FTE funding supports the offerings, even when there is a mismatch between student need and those offerings.
• Five- rather than four year-baccalaureates are becoming common due to students' inability to take the courses required to complete their degrees.
• Providers offer courses concentrated during hours convenient to them (10-2, Monday through Thursday) rather than hours convenient to students (24x7).

• The regulators of the higher education market--accreditors, state agency officials and a variety of federal officials--have constructed capital and labor intensive "input" standards (e.g., numbers of books, seats, Ph.D.'s, and the quality of the students who are admitted) that they believe will ensure that the education offered by institutions they license or accredit has value.
• In most states, the administrative and academic standards of capital intensive traditional institutions are the basis of licensing requirements. Consequently, programs that require little capital plant and have cost-effective operations will often be denied approval for lack of educational "quality."
• We reward institutions for their stability. We view innovation as suspect because almost any change will endanger the prerogatives of the faculty and call into question the capital intensive input standards and operationally inefficient structures that protect those prerogatives.
• Systems of education that require less capital and offer more efficiency are viewed as serious threats and elicit vigorous opposition.

What is needed are incentives which emphasize and reward outcomes regardless of how they are achieved. What would a new array of incentives that reward successful completion and cost-effectiveness look like? What are their characteristics? How would we make the transition from FTE funding formulas to a new method of public finance for higher education that achieves the outcomes we want?

State governments are taking various approaches to building statewide information infrastructures. Ranging from highly centralized to totally disaggregated, each approach has a unique set of coordination, governance, program development and financing structures that collectively might be called the state "investment strategy."

Recently, new ad hoc structures have emerged specifically to address the issues surrounding the development of telecommunications networks. Several states have created interagency structures, often called "telecommunications councils," to ensure broad planning representation from different sectors of government and industry. Some states have designated a statewide or multicampus system board as the primary decision entity, while others use the state department of education or an executive office of state government to facilitate telecommunications planning. Most states, however, use some combination of several entities to conduct planning for different uses of the information infrastructure. In some instances, states have little or no comprehensive planning for telecommunications, which often results in grassroots efforts by higher education institutions to build their own networks.

Planning in the Digital Economy

In the digital economy, product development cycles are seldom longer than 18 months and more frequently less. This presents a real dilemma for planning processes that require wide vetting, do not involve technologists who are at the leading edge of their field, and must wait for funding until after the processes are completed and debated. The conventional planning processes of governments simply don't work in the information age. The landscape is replete with planning fiascoes attributable to failing to understand the velocity (both the speed and trajectory) of technology such as:

• mandated C band satellite antenna when the technology had already moved to K band;
• major investment in circuits for video when the world of technology was moving to packets and the Internet;
• incredibly expensive supercomputer centers when the technology was moving to parallelism;
• statewide contracts with carriers who had no capability of providing integrated services; and,
• price-capped contracts in price-reducing markets which, within a year, were offering spot prices lower than the state contract.

Does this mean we should give up planning? Probably not, but we should at least follow the Hippocratic tradition of "first, do no harm." Most of our current planning processes, at least when focused on or dependent on technology, aren't likely to live up to that tradition. In the fast moving, competitive marketplace for learning environments, poor plans are considerably worse than no plan at all.

Macro Trends

There are several macro-trends that should help direct statewide investment strategies:

• It is clear that higher education will be best served by investments in packet switched, internet-based, technologies.
• Further, technologies that offer the potential for integrated services (voice, video, and data) will best fit the economic parameters of most colleges and universities since most investments in data and video are funded by offset savings in voice.
• As a consequence, providers that are focused on other technologies (most telcos on circuits, most cable operators on asymmetrical services) need to be cautiously, if it all, selected as provisioning partners.
• At least in the near term, it is unlikely that any one provider is capable of fully provisioning the needs of higher education. That clearly suggests that consortia of technology partners will likely be the case for several years to come.

We believe that long-term investment in computer networking for instructional programming has significant advantages over investments in the two predominant teaching and learning environments: the traditional on-campus classroom and the real-time televised class. While real-time televised distance learning is a viable and appropriate short-term solution to meeting instructional demand in an environment of significantly reduced resources, there are many reasons why investments in computer networks provide a forward-looking, cost effective strategy for the long term:

• They do not require fixed spaces such as classrooms or studios; instructors can teach and students can learn wherever they are.
• Their use is not limited to fixed times; they are available to instructors and students 24 hours a day.
• Computer networks permit individuals access to worldwide resources, thereby centering the educational process in learning rather than teaching.
• The same lesson can be received at home or work or in the dorm -- or used in the classroom; learning can be self-paced or cohort-paced.
• Instruction can use multiple media without special classrooms and draw on resources wherever they are stored.
• Since computer-delivered education is not bound by place or time, it is demand-activated by each user; it consumes virtually no resources except when in use.
• Networks provide a single infrastructure for most, if not all, university functions and services: instruction, research, communications, and administration. Accordingly, networks can integrate the instructional and management layers of curriculum delivery.
• Networked education is neither expensive nor difficult to use; a minimum home computer configuration can be purchased for roughly $1000 and requires only a standard telephone line for connection to a network.
• Of all investments, networks will prove easiest to modify as future exigencies dictate--a classroom can be crowded or empty, but it cannot be expanded or contracted.
• Networking allows each institution to link to and leverage the massive private investments by corporations and individual consumers in the rapidly expanding National Information Infrastructure.

While campus infrastructure is important, it is both an easier and more obvious problem than community infrastructure. Without deployment of high bandwidth services in communities across the state, most of the potential of asynchronous learning will be missed. Investment strategies need to have some focus on the general upgrading of network access throughout the entire state in addition to individual campuses.

The "last mile" is the critical issue facing most of higher education today. The last mile is generally taken to refer to providing high bandwidth to the home. It is not yet clear what technology will emerge to resolve the high speed access problem in the last mile. Roll out of telco services has historically taken greater than a decade and typically been too little, too late, and generally too expensive. Much of the "smart" money today is placed on the unregulated sectors of the economy as the place from which last mile solutions are most likely to arise. A part of any statewide investment strategy should include research and development partnerships with commercial providers who are likely to develop and deploy technology solutions to the last mile problem. Such partnerships are probably best directed from campuses with significant research interests in telecommunications and a history of providing community-based services.

Programmatic Investments

Statewide investments in the non-technology aspects of a learning infrastructure present a set of difficult decisions, the first of which is placing a bet on where solutions are most likely to arise--in the private or the public sector. Given the general reluctance of the public sector to invest in infrastructure research and development (particularly the non-hardware aspects), it is probably appropriate to hedge this bet by placing some investment in university programs that address statewide needs and offer the potential to scale-up beyond the local classroom and some in the growing commercial marketplace of private software developers and publishers who are beginning to introduce products for high enrollment courses. Several state systems have made a start at the latter by creating partnerships with private courseware providers.

Can Higher Education Develop Technology-Mediated Content on Its Own?

Some public policy makers are encouraging universities to move into technology-based content development: creating, marketing and distributing courses and/or instructional software products. Two reasons lie behind this encouragement: 1) to develop needed instructional software to improve the quality of educational services, and 2) to generate additional revenue streams to supplement current funding. In order to carry out these ideas, institutions would need to raise the necessary capital (through state investment, venture capital, consortial activity, grants, etc.) to develop and market products, and they would need to acquire the necessary operational and knowledge competencies (high quality design expertise, software development expertise, marketing expertise, timely customer service structures, etc.). We believe that higher education institutions are unlikely to be successful in these ventures for the following reasons:

Product development is not mission-critical

• The business of colleges and universities is educating students and conducting research; it is not the development, production, distribution, and marketing of products.
• Colleges and universities are organized, financed, and staffed to provide educational services and conduct research. They are nonprofit, tax-exempt institutions. Public institutions in particular have specific mandates for service as a condition of their existence.
• Were they to reconceptualize their mission to become producers of learning materials-i.e., to go into business-they would need to transform their basic organizational and financial structures, and forego their special status, in order to compete with the private sector.

• Higher education is presently not skilled at generating business. Most educators have little experience with developing business plans (for example, they lack awareness of the potential learningware market.)
• Institutions presently lack structures for business development of products.
• Higher education lacks a track record in successfully developing products.
• Higher education's executive leaders/decision-makers are generally not knowledgeable about the IT industry and the requirements of product development.
• Venture capitalists are unlikely to invest in higher education. Without the expectation of profit, private investors and entrepreneurs will not make the investments and take the risks entailed in creating and marketing a new technology.

• Higher education perceives the individual faculty member as the generator of content and delivery; this view is not suitable for a scaleable operation. Strategies depending on individual faculty members to develop instructional software cannot result in a sustainable body of materials.
• Higher education tends to think that faculty can develop software with only a minimum amount of preparation by using easy-to-use authoring tools. Software development, however, is a full-fledged programming job. It is also an iterative process: as projects progress, additional improvements are always recommended and upgrades are always needed which, in turn, leads to more programming.
• Despite the potential offered by instructional software, most institutions--even those who have worked hard to create them--have failed to integrate their use into their academic programs (i.e., the shoemaker's children are not wearing his shoes).
• Timing is generally set by the institution, not by the customer; institutions would need to make major adaptation in operating procedures. For example, decision-making structures on campus-or the lack of them-are an obstacle.

• Higher education is labor intensive and unaligned with the digital economy. Approximately 80 percent of the costs of colleges and universities are attributable to personnel costs. This compares to 25 to 40 percent for most of the manufacturing industries and less than 60 percent for the service industries. How can universities compete with the private sector given such a costly structure?
• Most of higher education's budget goes to compensate its employees, especially production employees (i.e., faculty). Any change in the way of doing business that increases the ratio of production employees to production affects the efficiency of the organization.
• There is a large disparity between "corporate speed" and "college speed." Educational institutions would need to learn to move much more quickly in order to be competitive.

Higher education needs the direct engagement of those whose business is the development, production, distribution, and marketing of educational products-specifically, the publishing and digital industries.

The proper design and distribution of public and private roles in the innovation process will be debated endlessly. What R&D specialists uniformly agree about, however, is that commercialization is the minimum measure of success. Inventions that cannot ultimately be produced, sold, bought, and adopted in practical use, without coercion, don't count as successful innovations. Within the broad context of innovation is the nitty-gritty process of inventing and introducing new technologies. This process includes basic research, transfer of the discoveries of basic research into the invention and development of new technologies, application of technologies to provide practical solutions to real problems, and the development of efficient production and marketing systems to make the new technologies affordable and accessible. Without the expectation of profit, private investors and entrepreneurs will not make the investments and take the risks that creating and marketing a new technology entails.

The One Percent Solution: Joint Procurement

Maricopa Community College District did an analysis of its undergraduate academic program to find out where students are concentrated. Maricopa, one of the nation's largest institutions of higher education with a student enrollment of 90,000, offers 2,000 distinct courses. Yet they discovered that 44 percent of the student enrollment at Maricopa is concentrated in just 25 courses. Put another way, 1 percent of Maricopa's courses generates nearly half of its total enrollment!

The 25 course titles include introductory studies in English, mathematics, psychology, sociology, economics, accounting, biology, and chemistry. Maricopa's numbers are typical of all community colleges (Dallas Community College and Miami Dade Community College have conducted similar studies: in each case, the percentage of enrollment in the One Percent courses exceeded 50 percent.) Ted Marchese of the American Association of Higher Education reports that the enrollment in One Percent courses in four-year institutions is about 35 percent.

Is there a case for some sort of joint procurement where 10 to 20 large universities or state systems put in $300,000 to $400,000 each? To illustrate the point, consider how many students take remedial math in a year? Pick an average credit hour cost, and you will quickly discover that it costs our institutions about $1 billion a year to do remedial math. By jointly procuring instructional software that significantly improves retention rates, the investment could be amortized in the first two or three months of use. There is no question about the pay-off to higher education; the challenge is to develop a way to collaborate to do these things and then to adopt them.

While it is unreasonable to expect a group of colleges and universities to reach consensus on a shrink-wrapped course, it might be possible to aggregate their demand and develop an RFP for a superset of disaggregated instructional modules. The federal government might also have an interest in being one of the participants in the procurement consortium since it currently spends a lot of money on education and training, particularly on the defense side.

Partnerships with the Private Sector

Another approach is to partner with the private sector. This is based on the assumption that both the publishing and higher education communities bring something of value to partnerships and that both stand to gain from them. The advantage of a collaborative model is that each party need not develop competencies brought by the other partner. In order to be successful, however, each party must be clear about what competencies it brings to the effort.

In the current model, the workflow is fairly discrete between higher education institutions and publishers. The publisher works with authors and a product development team, as well as with production and distribution partners, to provide instructional material. Higher education institutions work with instructors and other parts of the institution to attract learners and provide instruction. In a collaborative model, what would this workflow look like? A joint venture? Shared resources?

In addition, a reasonably well established set of criteria underlies each decision made in the current value chain. Publishers have knowledge of a history of market demand including information about curricular areas, geographically based-sales, best selling authors etc. Colleges and universities have made decisions about curricular offerings and degree programs based on information regarding employment trends, student markets, gaps in opportunities etc. What decision criteria make sense for a collaborative development model to yield sufficient return? e.g., Academic areas--business? human service professions? Areas with large demand and little interest from higher education such as remedial work? Areas leading to outside certification such as securities brokers? Areas with significant visual options? Areas with low geographical concentrations of students?

Finally, it is clearly advantageous for producers to have "group buyers." In a collaborative model, publishers' strengths in production are linked with potentially guaranteed use and certification of learning. Can universities guarantee institutional purchases if collaborative development is undertaken?

Differentiated Strategies

The dynamics of the digital economy favor those who carefully hedge their bets in proportion to their own weaknesses or market/technology ignorance. This suggests that technology investments should be distributed among several broad categories:

• local campus infrastructure;
• inter-campus and/or regional high performance, integrated service backbones;
• collaborations with industrial partners that are likely to develop technology that serves specific state needs; and,
• the non-technology infrastructure of credit sharing and banking, remote learning support services, and the development of scalable learning materials.

The central questions for state policy makers regarding investments in digital infrastructures are these:

• How can state planners assist in developing appropriate structures for multiple providers to join together to address statewide technology needs?
• What strategies will work best to encourage the private sector to develop and deploy high bandwidth services to the home? As this is an important issue for many high tech commercial entities, how can new collaborations in the public/private sector be encouraged?

Most states lack a clear mission for the development of a learning infrastructure. There seems to be a notable absence of those kinds of statements that indicate the intention to halve tuition and fee costs, increase access by 50 percent, and effect a general improvement in learning quality as witnessed by improved course completion rates, reduced average time to degree, higher first year retention, etc. Absent a defining mission and specific goals, most efforts seem to be mired in incrementalism and ad hockery. State planning efforts need to avoid simple extrapolations of the status quo and set some aggressive and quantifiable goals for the development of a learning infrastructure.

Our thesis is simple. In times of major upheaval, we must learn to interpolate rather than extrapolate. Extrapolation looks at the past and assumes, in the words of the systems theorist Jerry Weinberg, that the future will be like the past, because in the past, the future was like the past. In most situations confronted by our organizations, this is a reasonable approach. However, when a revolution is brewing, such a focus on the past can be very misleading.

A better approach is to create a scenario of what you believe the operating climate for your organization is likely to be in the future (say 10 years out) and attempt to set a course based upon interpolating between where you are now and that future scenario. Such an interpolation will suggest courses of action that look very different than those derived from extrapolation. Let's consider a few examples of this distinction.

Ten years from now, there will be over 25 million people registered for postsecondary learning experiences in the United States alone. The vast majority of them will not be pursuing a degree program; instead, they will be seeking to update their skills and knowledge base primarily in response to changes in the economy. The percentage of the population seeking the "undergraduate experience" will have decreased over the preceding decade, and the number of degree-granting, residential colleges will have stabilized at a number and size relatively consistent with the number of 18 - 22 year-olds. The non-traditional student will have become the norm and will represent the dog rather than the tail.

Extrapolation would suggest extending our campuses in time (like creating weekend colleges or life-long relationships with our alumni) and space (like building virtual catalogs out of existing degree programs and technology-mediated courses or establishing satellite student service centers.) Interpolation suggests that new services (like on-line examinations to assess various kinds of student learning and credit "banks" that serve as transcript centers for the accumulated--and disaggregated--learning experiences of non-traditional students) will emerge to serve the dominant student population. Interpolation will have us focused on those areas where we have competitive advantage, breaking down arbitrary geographical and political boundaries, retailing and/or wholesaling net-based learning modules in partnership with private industry.

Much of this change will be attributable to the nearly complete transition from an infrastructure based on analog technology to one rooted in silicon, based on the microprocessor, fiber optics and end-to-end digital networks. The ubiquity of networked information appliances coupled with broadband communications channels reaching nearly every home and business in the country will have made interaction with rich multi-media commonplace and ordinary.

Moore's Law--microprocessors will double in power and halve in costs every 18 months--will continue to hold through the next decade. The entry level information appliance of a decade from now will be 20 to 100 times more powerful than our current desktop personal computers, will cost about $500, and will connect to a network populated with hundreds of millions of other computational devices used daily by nearly a billion people around the world.

Extrapolation might suggest creating the virtual university by building on the successes of faculty-delivered, analog-TV-based, distance education supplemented by computer-based conferencing and email. Interpolation will convince us that network-delivered, computer-mediated, learning experiences will dominate postsecondary learning in the decades ahead. An interpolation view would have our institutions linking their on-campus digital infrastructure to the commercial Internet, creating new learning partnerships with strategic industry partners, and at least in the early stages, creating a market presence and market share in areas of natural competitive advantage.

Will most of the action in this domain come from new, private enterprises who will move aggressively to fill the void left as a consequence of higher education's choice not to, or inability to, redefine itself? Will higher education content itself with doing pretty much as it always has and restrict itself to the niche of residential instruction? Or will it seize the initiative and develop realizable long term goals for a learning infrastructure and use those goals as a basis for making investment decisions?

While interpolation runs some risk of overestimating the rate at which the future will arrive, it is a strategy that will bridge the chasm. Extrapolation will be a failed strategy because, in the words of an old Chinese proverb, it is impossible to cross a chasm with a thousand small steps. Tinkering at the margins is a strategy focusing on the past that is guaranteed to miss the sea change that is about to wash over higher education.

Section I. Introduction

The introductory material framing the issues draws on materials written by Jim Mingle for various NLII meetings.

Section II. Impact of the Information Technology Revolution on Society and Higher Education

Material is this section is from Carol A. Twigg and Diana G. Oblinger, The Virtual University, published by Educom in 1997; Carol A. Twigg, Academic Productivity: The Case for Instructional Software, published by Educom in 1996; Robert W. Tucker and John Sperling, "Time for Nationally Authorized Universities," published by Educom in the Fall/Winter 1997 issue of The NLII Viewpoint.; and Carol A. Twigg and Michael Miloff, "The Global Learning Infrastructure," a chapter in Don Tapscott's Blueprint for a Digital Economy to be published by McGraw-Hill at the end of 1997.

Section III. The New Learning Environment

Material is this section is from Twigg and Miloff, "The Global Learning Infrastructure."

Section IV. Implications for Public Policy

Material in "Today's Environment" is from Tucker and Sperling. Material in "Tomorrow's Environment" is from Twigg and Oblinger, The Virtual University. Material in "Challenges for the Future" is from The Virtual University and "The Global Learning Infrastructure."

Section V. Change Strategies: The Role of Incentives

The reference to Sir John Daniels is from his book, Mega-Universities and Knowledge Media: Technology Strategies for Higher Education published by Kogan Page Limited in 1996. The case study is taken from an article written by Bob Koob for the Fall 1996 NLII Viewpoint about the experiences of California Polytechnic University at Pomona. Other material is from Academic Productivity: The Case for Instructional Software, "Time for Nationally Authorized Universities," and Carol A. Twigg, Notes for the June 4 - 5, 1997 NLII-ITP Symposium on Creating and Delivering Collegiate Learning Materials in a Distributed (Networked) Learning Environment: A Business Model for University-Corporate Collaboration published by Educom on its WWW site (www.educom.edu).

Section VI. Investment Strategies

The introductory material framing the issues is from materials written by Jim Mingle for various NLII meetings. The material on "Video Networks vs. Computer Networks" is from an article by Lowell H. Roberts, The Network as Strategic Asset: The Path to Learning Productivity, published by Educom in the Fall 1996 issue of the NLII Viewpoint. Material on "Programmatic Investment" is drawn from Academic Productivity: The Case for Instructional Software and the Notes for the June 4 - 5, 1997 NLII-ITP Symposium.

Section VII. Conclusion: Interpolating the Future

Material is this section is from Robert C. Heterick, Jr. and Carol A. Twigg, "Interpolating the Future," published in Educom Review, Vol. 32, No. 1, January/February 1997, p. 60.

List of Participants